700MHz auction: What’s really up for grabs, and why it won’t be monopolized

With the 700MHz auction rules announced, we take a closer look at the various …

Last week, the FCC released several hundred pages of rules for the upcoming 700 MHz spectrum auction, and they're already stirring up a bit of controversy. The Wall Street Journal ran a piece today on the fact that the rules will not prohibit a single buyer from snapping up the two national sections of the spectrum. Even though such a move is unlikely (it would be expensive, and the two bands have very different build-out requirements), the article shows the continuing fascination that people have with the auction; even rules it doesn't have can make news. Let's dig in a little deeper and get a handle on what's actually for sale.

Readers who have been following the story for some time are probably aware that the FCC imposed certain open access conditions on one chunk of available spectrum, and it made another prime chunk only available to bidders willing to be involved with a public/private public safety network. Although these two chunks of spectrum have secured the most press, three other pieces of bandwidth will also be available in more than 1,000 regional licenses. How does all of this fit together?

The FCC has produced a helfpul map of the available spectrum, which runs from 698-806MHz. In the image above, the yellow sections have already been auctioned off, and the gray sections are reserved for the nationwide public safety broadband network that will be constructed over the next few years. The remaining (white) A,B,C,D, and E blocks are what will be offered at auction later this year.

The big action is in the C and D blocks. C covers two 11MHz chunks of spectrum that can be bid on together, making 22MHz available for national commercial use. This is the prime spectrum that Verizon and others would like to get their hands on, and it's also the bit that Google expressed interest in buying. Anyone who pays for the licenses to this block will need to abide by the two open access conditions (open devices and open applications) laid down by the FCC.

The D block offers two 5MHz sections for a total of 10MHz, and it will be available nationwide. Whoever picks up this section, though, must do so as part of the Public Safety/Private Partnership established by the FCC. This means that the license holder will have to build out a nationwide wireless network that is good enough to meet public safety specifications for coverage and redundancy. The licensee will get the two (gray) public safety portions of the spectrum and will have the (white) 10MHz part to operate as a commercial network. Commercial traffic can also be carried over the public safety portion of the network so long as it is not being utilized.

The A, B, and E blocks make up 30MHz in total, but the licenses for these blocks will cover only small geographic areas. The idea is to make wireless spectrum available to regional or rural wireless operators that could not otherwise afford to bid on the national spectrum.

These local licenses will come with build-out requirements. Wireless operators will need to cover at least 35 percent of the territory covered by their license within four years, and a full 70 percent of the territory within 10 years.

The 22MHz C block also comes with requirements: 40 percent coverage within four years, 75 percent coverage within 10. The FCC will automatically reclaimed "unserved portions of the license area" from companies that do not meet the build-out requirements.

Monopolization unlikely

The upshot of all of this should be clear: it's rather unlikely that any single player will swoop in and attempt to buy all of the available spectrum. The build-out requirements for each block varies significantly, meaning that were one company to try and buy the entire spectrum, it would find itself knee-deep in requirements relating to public safety and coverage quotas.

There will certainly be hot competition for the C block, with its 22MHz of spectrum that could be used for national, high-speed wireless service. The D block is a little more dicey, although two new consortia (Frontline Wireless and Cyren Call) have expressed interest in running the public safety network and then reselling commercial access to other companies. It's not at all clear that big telcos have an interest in getting involved in this, especially since the D block will be subject to the most stringent build-out requirements. One telco grabbing both C and D would also be quite expensive, and companies that win a license still need a ton of cash in order to build the actual networks. As even the WSJ piece pointed out, this sort of consolidation is quite unlikely.

But the telcos will certainly try to grab the 22MHz C block, both to augment their own wireless offerings but also to block companies like Google from getting a national spectrum footprint of its own.